Correlation Between Midcap Growth and Acrex

Can any of the company-specific risk be diversified away by investing in both Midcap Growth and Acrex at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Midcap Growth and Acrex into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Midcap Growth Fund and Acrex, you can compare the effects of market volatilities on Midcap Growth and Acrex and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Midcap Growth with a short position of Acrex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midcap Growth and Acrex.

Diversification Opportunities for Midcap Growth and Acrex

-0.88

Correlation Coefficient

Midcap Growth  Acrex

Pay attention - limited upside

The 3 months correlation between Midcap and Acrex is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Midcap Growth Fund and Acrex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acrex and Midcap Growth is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Midcap Growth Fund are associated (or correlated) with Acrex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acrex has no effect on the direction of Midcap Growth i.e., Midcap Growth and Acrex go up and down completely randomly.

Pair Corralation between Midcap Growth and Acrex

Assuming the 90 days horizon Midcap Growth Fund is expected to generate 0.87 times more return on investment than Acrex. However, Midcap Growth Fund is 1.16 times less risky than Acrex. It trades about 0.37 of its potential returns per unit of risk. Acrex is currently generating about -0.32 per unit of risk. If you would invest  1,028  in Midcap Growth Fund on September 28, 2024 and sell it today you would earn a total of  174.00  from holding Midcap Growth Fund or generate 16.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	67.74%
Values	Daily Returns

Midcap Growth Fund  vs.  Acrex

Midcap Growth

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Midcap Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly weak basic indicators, Midcap Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Acrex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acrex has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Midcap Growth and Acrex

The main advantage of trading using opposite Midcap Growth and Acrex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midcap Growth position performs unexpectedly, Acrex can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Acrex will offset losses from the drop in Acrex's long position.

The idea behind Midcap Growth Fund and Acrex pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.